Monday, July 28, 2008

Global issues slow growth

Published: Monday July 28, 2008

IT HAS BEEN confirmed: worldwide heavy prices on oil and other commodities and a sluggish global economy are taking their toll on local economics.

Last Friday Central Bank of Barbados governor Dr Marion Williams said that for the first time in five years, growth in the economy's total output for the first half of the year fell significantly below the average 3.6 per cent.

She indicated that economic output was virtually flat from April to June and "as a result, total output growth was limited to an estimated 1.4 per cent".

Williams presented these facts in her review of the economy for the first six months of 2008 at the Central Bank, Tom Adams Financial Centre, The City, and reality matched the forecast she gave at the end of the first quarter.

"The economic outturn for 2008 will depend largely on the performance of the international economy," she had said.

Last week she reported that: "The real pace of economic activity in Barbados was constrained by persistently high international prices for oil and other major commodities, as well as the slowing global economy."

These exogenous factors rippled sectors such as tourism and construction.

"First-quarter tourism output growth of almost 13.0 per cent was partially outweighed by an estimated decrease of 9.8 per cent in the second quarter. . . .

"Activity in the construction sector fell by an estimated 6.7 per cent . . . [and] had a somewhat dampening effect on utilities production, with output of electricity, gas and water contracting by an estimated 1.4 per cent," she noted.

According to preliminary estimates for the half-year, Government recorded a $294.3 million fiscal deficit, more than twice the amount ($142.9 million) for the same period last year.

Also, said Williams, "An ever-present feature of economic activity during the six-month review period was the upward trend in domestic retail prices. In addition, the most recent labour market data for the first quarter of 2008 indicate that the unemployment rate was slightly higher that the comparable rate at the end of the first quarter of 2007."

Considering the rest of 2008, the governor again pointed to international economic affairs to gauge likely real output growth which she estimated to range between 1.5 and 2.0 per cent.